Straus v. DVC Worldwide, Inc., 484 F.Supp.2d 620 (S.D.Tex., March 23, 2007), involves a dispute over a 1989 photograph of the well-known golfer, Arnold Palmer. Straus, a professional photographer copyrighted the photograph and licensed it for use in the defendants’ 2001 and 2002 advertising campaigns to market the smoking-cessation products, Nicorette and NicoDerm. The United States District Court for the Southern District of Texas granted summary judgment in favor of the defendants, DVC Worldwide and GlaxoSmithKline, on Straus's claim that he was entitled to a tenfold multiplier on his actual damages.
The licensing agreement between the defendants and Straus ended when Straus demanded increased fees for renewing the license. DVC decided to use 1995 photograph of Arnold Palmer in its subsequent campaigns. Straus claimed that DVC and GlaxoSmithKline engaged in unauthorized use of the 1989 photograph through their continued use of the photograph for a few seconds during one of four thirtysecond television commercials and the undisputed evidence that one in-store advertisement including Straus's 1989 photograph of Palmer remained in a single store (out of 23,000) for less than one month after the license was not renewed. The District Court ruled that these unauthorized uses were de minimis, but was forced to address the potential damages for the continued use of the 1989 photograph as part of the self-promotional/case study materials contained on DVC’s website.
Straus sought to recover $1,418,000.00 in actual damages based upon a ten-fold multiplier applied to his damage calculation. He claimed that the increased actual damage award should be based on industry practice and custom in setting retroactive license fees. The Court recognized that in a copyright infringement case, actual damages may be determined by examining the fair market value of a license authorizing the defendant's use; and proof of industry practice "inarguably is crucial to the estimation of actual damages." Punitive damages, however, are generally not allowed in cases of copyright infringement.
The District Court stated that "the value of what was illegally taken is not determined by multiplying." A tenfold increase in actual damages would serve to punish and not merely compensate. The Court reasoned further that copyright law already "punishes and deters" through the enhanced statutory damages provision in 17 U.S.C. § 504(c). Multipliers are typically used only when the parties include them in licensing agreements and are enforced as part of the contract. Multipliers should not be used to determine the fair market value of a license at the time infringement occurs. Such would create a standard for double-awards, "which would be punitive in nature."
Larry Bowman, Chair of Cozen O'Connor's General Litigation Department and the Managing Partner of the firm's Dallas office, considers Straus a significant ruling with respect to calculating damages in copyright infringement cases. Too often, plaintiffs present incredulously high damage demands estimate based on multipliers alculated from "supposed" industry standards. Engaging in reasoned settlement discussions is nearly impossible when an opposing side has grossly overvalued the case from the outset.
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